Three ways of adding value with cloud computing

Why do businesses invest in IT and cloud computing? I see three different reasons.

The most obvious one is to reduce the cost of IT.

This is apparent in questions like: ‘Is a cloud e-mail solution cheaper than having your own mail server’? In my experience there is typically no business case for migration in such cases, unless the current situation is so desperate that replacement is necessary anyway. Something similar holds for data centers, as demonstrated by McKinsey a couple of years ago.

The second motive for investing in IT and cloud computing is to lower the cost of business. This is more interesting. Examples can be found in most classic computer applications. The business case revolves around improvements in the business processes, and IT cost is not necessarily going down. Think e-mail to mobile users, which was done by airline KLM and retail giant Ahold. Big data is another example. Cloud computing then enables applications that were hard or expensive to do in the old days.

The final motive is ‘game changer’. In this situation cloud computing enables a new, potentially disruptive, business model. A spectacular example is NetFlix that switched from renting out DVDs to supplying ‘video on demand’. This transition is not always voluntary. Software companies for example are often forced these days by their customers to deliver their product as Software as a Service.

The business case here does not revolve around cutting costs, but around company survival. Of course this is most uncertain situation. For example, we know that ‘the Internet of Things’ will generate new business, but we are totally clueless about the business model that will turn out to create the biggest value.

These three motives have, in ascending order, the potential for impressive business impact. But only in the last category will customers see true innovation. Only then will the customers see change in the service they are getting, and will they get the opportunity to innovate their own processes.

Unfortunately, most discussions around cloud computing are stuck in the first type of discussion. That is a missed opportunity.

Do you want to be able to have the proper strategic discussion about IT and the role of cloud computing? Then talk to me about Cloud Adoption Essentials.

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